New ACA-Related Law Aims to Protect Midsize Employers

The new law ensures that cities with between 51 and 100 employees will continue to be treated as large employers in 2016.(Published Oct 26, 2015)

President Obama signed the Protecting Affordable Coverage for Employees Act (PACE) on Oct. 7. The new law ensures that cities with between 51 and 100 employees will continue to be treated as large employers in 2016, and will not have to conform to the Affordable Care Act (ACA) rules for small employers.

The ACA small employer rules help determine how insurance companies pool risk and might have led to an increase in premiums or other significant impacts on employee group health benefits offered in cities of that size range.

While the new law allows states to continue to define a small employer as one with 50 or fewer employees, states may voluntarily expand the definition of small employer to include employers with 100 or fewer employees. Because the Minnesota Legislature is not currently in session, it is unlikely that Minnesota will expand the definition for 2016, but might consider it for 2017.

Increasing the size of the small group market was designed to help make insurance more affordable for small employers by expanding the risk pool and bringing more participants into the ACA’s exchange program. However, opponents feared the combination of the Employer Shared Responsibility penalties becoming effective in 2016 for mid-sized groups, and the added cost related to ACA plan requirements would have increased cost to those employers.

Small employer requirements Small group market plans must meet several requirements that large group plans do not, including the following:

Cover 10 essential health benefits.

Fit into the actuarial value levels (platinum, gold, silver, and bronze) defined by the ACA.

Participate in the risk adjustment program and be part of a single risk pool for setting premiums.

Only consider age, geographic location, family composition, and tobacco use in setting rates.

Without the enactment of the PACE Act, midsize employers would have been in a “squeeze position,” subject both to the “pay or play” provisions (which do not apply to employers with fewer than 50 employees) and the small group insurance requirements (which do not apply to employers with over 100 employees).

How should cities respond? What does your city need to do as a result of this law change? If your employee group size is 50 or less, or 101 or more, probably nothing. If you fall into the 51-100 range, check with your insurance carrier to see how this law change will impact your plan options for 2016.

Specifically, check to be sure that as you “count” your number of employees, you are complying with either the state definition found in 62L.02 (20 hours or more), or the federal definition of all full-time employees plus all full-time equivalents (FTEs). This may be carrier-specific so it pays to check.

The PACE Act does not change any aspect of the “pay or play” provisions of the ACA, which covers all employers with 50 or more employees. These provisions generally require cities with at least 50 full-time employees to either offer group health coverage or owe a penalty if any full-time employee is eligible for and purchases subsidized coverage through a marketplace exchange. For more information, see the LMC Health Care Reform Web page and consult your city attorney.